The difference between recession and depression explained:
Destructive deflation or runaway inflation?
Inflationary pressures are still throttling the economy. The economy is balancing on the critical edge of destructive deflation and runaway inflation. Prices could quickly and unexpectedly fall or rise, one way or the other. The occurrence of relative price stability is a product of deflation and inflation acting at the same time. Far from price stability, it is actually an extremely unstable situation.
In the period from 2009 – 2016 we have experienced deflation because the world is in a depression, but governments cannot tolerate deflation, so they have to cause inflation. That’s why excessive money printing has been going on for so long. There is pressure from both sides, deflation against inflation – depression against money-printing – one pressure manifestation against the other. Deflation and inflation both fight on the edge of a knife. Eventually, one side wins, but the battle could go on for a long time before one side wears out the other side.
The world has been in a depression since 2008, and that obviously is deflationary. In a depression, debtors sell assets to raise cash and pay their debts. That pushes down asset prices. Falling asset prices, in turn, put other investors in distress, causing further asset sales. So, it goes on in a downward price spiral.
Printing money is logically inflationary. With more money chasing a given quantity of goods and services, the prices of those goods and services tend to rise.
If central banks stop causing inflation, deflation will quickly overwhelm the economy. If central banks don’t give up and keep printing money to stop deflation, they will eventually get more inflation than expected. When central banks print reserves far in excess of domestic savings, the result is inevitably inflation.
The US, EU, and Japan have all printed $4 trillion, that’s 12 trillion in total of added liquidity. This is monetary inflation on an unprecedented and massive scale, which is made even worse when China’s 8 trillion in money printing is brought into the equation. Far from resulting in any lasting increases in commodity prices or wages, but rather causing collapsing profit margins, moribund unemployment figures, and even falling commodity prices, this is bound to end in a financial disaster.
Central banks can monetise everything, leading to unprecedented asset bubbles which, though only for the time being, boosts investor and consumer confidence. However, they can’t print trade – that all important driver of growth in a globalised world, which arose long before central banks were set to monetise over $1 trillion in bonds each and every year to mask the fact that the world is deep in debt, globally.
Massive asset inflation:
The more they print, the more capital is available for institutions – central banks – to invest. This creates massive asset inflation, translated into the rising prices of assets, as central bankers buy – bonds, stocks, and real estate – to push economies upwards all around the world. Instead of prompting an immediate currency flight, as seen in Argentina or Zimbabwe, this inflation has produced an investment-led boom. This ongoing financial boom is lunacy of historic portions. Nobody knows exactly when, but eventually the world will lose faith in central banks’ ability to boost markets.
The Bank of Japan (BOJ) is buying every new bond the government issues. Japan can’t meet its 2% inflation target. The latest numbers for November show consumer prices increased by 0.07% – well below expectations. Even with the massive amount of stimulus measures, Japan can’t get its economy out of the low growth, deflationary spiral downhill.
Since Prime Minister Shinzo Abe called for unlimited monetary easing in November 2012, the yen has weakened by nearly 50%. The BOJ has managed to send asset prices soaring – significantly weakening the yen’s purchasing power. So far, the BOJ has pushed the yield on Japanese 10-year bonds down to 0.32%. By comparison, the U.S. 10-year bond yields 2.22%. Japanese stocks are up 70% since the beginning of 2013.
Robbing the populace:
Abe has successfully destroyed his country’s currency, robbing his own people, and boosting the stock market, but he’s still not seeing the desired inflation – so he continues to ease. He won overwhelmingly in a ‘rigged’ re-election victory. He has a mandate from the Japanese public to continue to pilfer his country on behalf of the Crime Cabal. He even announced a new stimulus package of 3.5 trillion yen ($29.1 billion) to ‘subsidise’ the country’s poorer regions and households. Japan has the stimulus throttle running at full speed – and is not about to let up.
Then again it isn’t the only country actively injecting its monetary system with stimulus. Worldwide, central bankers faced with policy limitations – like extremely low interest rates – are struggling to find “creative” ways to stimulate.
Accordingly, the EU as a whole is in a comparable position as Japan, with low growth and borderline deflation. EU nations continue to argue about stimulus versus austerity. Meanwhile, left-wing populist parties have enough support to potentially cause Greece, Portugal, Italy and even Spain to default, sending the EU into a sovereign debt crisis. According to Eurostat, the EU’s statistics arm, Italy, Spain, Greece, Slovenia, and Slovakia were already in deflation (depression) as of September 2014 – adding even more pressure to the ECB to come into action. And the bad EU-news continues – with an economic slowdown.
Official figures show that the EU has now slipped into deflation, with prices in December at 0.2% lower than a year earlier, far below the ECB’s target of just under 2% inflation and even worse than the sombre predictions of a 0.1% fall, which means the EU is in recession or more precisely, a depression.
Inflation destroys consumer purchasing power. The creation of money and credit does not create prosperity. It’s a form of taxation of the consumer.
“Stimulus spending typically creates a short-term illusion of prosperity at a long-term price distortion, ruining the economy and debasing the currency.”
“Stagflation is the type of inflation typically caused by an expansion of the money supply and bank credit ahead of gains from productivity and asset growth. More money and credit chasing fewer goods and services typically means higher prices over the long run.”
This is the kind of inflation that we have been subjected to first by Greenspan, followed by Bernanke, and now Yellen of the Fed, trailed by all other Central Banks of the world.
“Price inflation may also remain initially muted because excess liquidity can first find its way into stocks, real estate, or bond assets, creating bubbles. A prolonged delay in running up commodity and consumer prices may ensue due to this.”
This excess liquidity has already found its way into stocks, real estate and bond prices, and now it’s steadfastly finding its way into commodity prices too. Our leaders are supposed to look into these kind of problems, but they all are asleep, or lying, or probably both.
Easy credit has killed the consumer and can be seen as the main cause of today’s crisis. When Central Banks started to flood the markets with easy money to whomever wanted to have it, a global spree of largely employees and workers started to consume beyond their means, by buying things they didn’t need with money that wasn’t theirs.
The FED and associates wanted to flood the market with money to keep the economy growing and running, where a recession could have been avoided, had the correct measures been taken! The philosophy was to put money in everyone’s pocket to have that spent on anything at all, stimulating the economy to grow to the eventual detriment of consumers.
This unparalleled ocean of artificial liquidity should surely lessen the effects of the recession, was the conviction; however, the unplanned consequences of these policies is that it causes inflation, followed by stagflation that eventually wipes out the savings of millions of people. It will become the “Bailout Bombshell” without solving the economic crisis that is more and more morphing into a depression.
Central Banks are making a bad crisis worse:
Any way we look at it, this applied approach is making a bad crisis even worse. In the end, it will be the taxpayer that pays the bill. As a result, meanwhile commodity prices are rising. Economists differ as to how much the rising oil prices affect GDP, but almost all of them agree that rising oil prices do cause a decline in GDP, at least to some extent.
An upcoming oil crisis would force families to stretch their already overburdened budgets even farther. The average price of gasoline is constantly rising. Everyone believes it is even going to be significantly higher than it already is. High oil prices are going to influence the cost of just about everything, and high oil prices are also going to cause the economy to slow down, thus affecting the unemployment numbers even more.
If families have to spend €10 or €20 more each time they visit a gas station, that means that they are going to have less disposable income. They won’t be able to spend as much at the stores. Not only that, but since the price of oil affects the price of almost everything, people will find that their dollars/euro’s, have reduced purchasing power.
Nonetheless our leaders believe they can still print up more paper money, which is as good in value as the real stuff, in order to resolve this severe recession. This is causing INFLATION, and will thereafter spawn stagflation, to be followed by hyperinflation.
Be aware that this so-called recession is not a recession, because there is no buying opportunity. We already find ourselves in a depression that could take a long, long time to recover.
The difference between a recession and a depression explained:
The difference between a recession and a depression is best explained as follows: A recession is a pause in an otherwise healthy, growing economy. A depression is when the economy drops dead. And when it drops dead, the value of assets that people own such as as stocks, bonds, real estate, derivatives, and even debt, is called into question. No one knows what these are worth in real terms, now that the economy that created these valuations, no longer exists.
That’s the biggest uncertainty at present. The majority of businesses that were set up to provide products and services to the consumer binge economy, will not survive. All the debts and obligations that this consumer economy has produced are no longer viable.
But eventually, unless the Central Banks stop the process of money printing, which they vehemently resist, things will sort themselves out. Businesses will go broke. Homeowners will be distressed. Automobiles will go back to the dealers or will be repossessed and auctioned off. Prices will sink to a level where people are able to buy again. And the whole process will start over again from scratch. This can take a long, long time, particularly when government is trying to prevent it from happening by injecting more money into the market.
What is needed is Schumpeter’s creative destruction. It will take time before a new economic model takes shape. Then, the markets will dictate to us which are valuable assets and what those are worth. This will be further outlined in the following essay, with an exposé on Creative Destruction.
Is there a rumble of hope for the better?
Trump has accomplished what no other president could, or dared. During his latest Asian trip; he got the nations together in Asia. He met with all the global leaders who came to visit him. This reveals the high regard in which he is held by world governments. The agreements reached and relationships built were incredible and unprecedented. He did a lot of good work for, not only Americans, but for all of Humanity.
Returning from this historic trip to Asia, he appears to have brokered a $250 billion dollar ‘Fair Trade’ deal with China. Take note that ‘Fair Trade’ can only be accomplished when goods, services, and products are valued properly based on what they are. The corresponding Currency would have to reflect this value for trade to be fair. This implies it should be paid for with gold backed money!
He also spoke to his Nation describing the success of his trip, by starting with a statement that the “US is back!” or in a state of recovery.
President Trump, met with Putin, and Xi Jinping off the record. President Jokowi, of Indonesia, was there as well, in his function and as the representative of the Soekarno M1 gold holdings in the collateral accounts.
This means that the BIS, the World Bank, the IMF, the European Central Bank, the Federal Reserve Board, the Bank of Japan, Bank of England, etc. must be taken out of Khazarian control. They are not going to just hand over the keys, so at the end of the day, it will most likely require men with guns to do the job. That is why U.S., Chinese, and Russian military forces are humanity’s best hope.
Global Financial Crisis:
Documentary on Why the World Faces a Financial Meltdown:
This documentary is one of the best at explaining the causes of stock market crashes and at divulging why another is probably inevitable – what are the solutions? Well there are simple solutions, like gold backed currencies, but the Deep State wants chaos, so Governments and central banks are ignoring the right solutions, leading the global economy into a crisis – a frightening look at what could happen in the near future to the global economy. Debt is too high. Banks are run in a reckless fashion, all encouraged by the central banks and puppet governments.